Challenges Facing Bitcoin in the Developing Economies
Bitcoin has undergone a massive resurgence over the recent months, pushing its value to record highs. Thanks to the intensive campaigns by leading investors and major corporations, Bitcoin increasingly attracts businesses and people from various parts of the world. The crypto revolution began in the developed world but, it has now increased into developing economies, driving growth in multiple sectors.
While Bitcoin is the world’s most popular and valuable virtual currency, it remains a new concept that most individuals in the developing world do not understand. Besides, it is also tied to various challenges and risks, underpinning its successful adoption in developing economies. The following article analyzes Bitcoin’s main challenges in the developing world.
Intense Competition from Other Digital Currencies
Several digital currencies existed in the developing economies before Bitcoin despite their low adoption rates. XRP is one of the early cryptocurrencies to gain root in the developing world, with several economic projects currently underway. Those early cryptocurrencies and the new ones developed after Bitcoin are also rapidly gaining traction in the developing economies as people increasingly move towards cashless payments and digital assets. That poses a significant challenge for Bitcoin, prompting its developers to create a more attractive proposition to gain acceptance over the other cryptocurrencies.
As leading crypto exchanges like bitcoin buyer report, Bitcoin transaction fees have relatively increased over time, and the trend would continue. Every new transaction contributes to increased costs. Besides, Bitcoin is a decentralized digital currency not tied to any physical asset and without a universal exchange rate. The Bitcoin creators have created various workarounds to address its scalability with little success. Thus, experts argue adopting Bitcoin as a primary currency in a developing economy would be devastating due to the scalability issue, resulting in substantial transaction fees. Nevertheless, Bitcoin transaction costs are still much lower than those levied on bank and credit card money transfers.
Low Transaction Speed
Indeed, Bitcoin allows people to send and receive payments across the world faster than traditional bank transfers. However, Bitcoin transactions usually take an average time of 43 minutes to verify, which is quite long. That prompts those who wish to complete transactions quickly to pay additional fees. Users who do not pay the transaction costs might have to wait for hours to complete transactions. The Lightning Network provides a turnaround to Bitcoin transaction speed, but the system is not robust enough to facilitate instantaneous and low-cost money transfers. That makes most people perceive cash payments as more efficient than Bitcoin.
Inadequate Supportive Environments
Many financial institutions, businesses, and individuals in developing economies have begun using Bitcoin. For example, Bitcoin is now a legal tender in El-Salvador, where the population uses it to acquire wealth and pay for goods and services. However, adoption remains low because most businesses in the developing world lack the technological capabilities to integrate it into their systems.
Tech giants such as Google and Apple, highly popular among the populations in the developing economies, have even banned Bitcoin wallet applications from their mobile platforms. Besides, a more significant percentage of those populations also lack a better understanding of cryptocurrencies and how they work, making them skeptical about using Bitcoin.
Some governments around the globe refer to Bitcoin as a speculative asset that would induce huge financial risks if integrated as a country’s primary currency. Such arguments discourage Bitcoin’s adoption by mainstream institutions, further hindering its accessibility and viability in developing economies.
Bitcoin and other cryptocurrencies can revolutionize the traditional financial systems in developing economies despite the above challenges. It provides a coherent and valuable currency, not subject to government or political influence. Bitcoin also ensures secure and transparent financial transactions. Thus, developing economies would be best to address the above challenges and encourage Bitcoin’s integration to inspire growth.